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The Effect of Succession Taxes on Family Firm Investment: Evidence from a Natural Experiment

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  • MARGARITA TSOUTSOURA

Abstract

type="main"> This paper provides causal evidence on the impact of succession taxes on firm investment decisions and transfer of control. Using a 2002 policy change in Greece that substantially reduced the tax on intrafamily transfers of businesses, I show that succession taxes lead to a more than 40% decline in investment around family successions, slow sales growth, and a depletion of cash reserves. Furthermore, succession taxes strongly affect the decision to sell or retain the firm within the family. I conclude by discussing implications of my findings for firms in the United States and Europe.

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  • Margarita Tsoutsoura, 2015. "The Effect of Succession Taxes on Family Firm Investment: Evidence from a Natural Experiment," Journal of Finance, American Finance Association, vol. 70(2), pages 649-688, April.
    • Handle: RePEc:bla:jfinan:v:70:y:2015:i:2:p:649-688
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    File URL: http://hdl.handle.net/10.1111/jofi.12224
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